June 17, 2020 / 9:56 AM / 18 days ago

CEE MARKETS-Zloty underperforms after central bank comments on exchange rate

    By Anita Komuves
    BUDAPEST, June 17 (Reuters) - Central European currencies
rose on Wednesday, with the zloty bucking the trend after the
Polish central bank signaled it preferred a weaker currency to
support economic recovery.
    Stocks were looking for direction as markets were reacting
to a rising number of new coronavirus cases in China and the
United States.
    Poland's central bank on Tuesday left its benchmark rate
unchanged at 0.1%, as expected. Poland unexpectedly cut interest
rates to almost zero in May to support the economy. 
   The bank also signaled it would have preferred the zloty to
be weaker to support the economy, which weakened the Polish
    "The pace of the economic recovery could also be mitigated
by the lack of visible zloty exchange rate adjustment to the
global pandemic shock and to the monetary policy easing
introduced by NBP," the central bank's statement said.
    "EURPLN rose sharply on the remarks in the MPC statement
regarding the zloty," Santander Bank said in a note. 
    "It is hard to guess whether the zloty remark in the
statement was just a one-off or shows a change in the NBP’s
reaction function."
    The zloty was flat, trading at 4.44 to the euro on
Wednesday, while other currencies firmed. The Czech crown
 gained 0.23%. 
    The Czech central bank's vice governor, Marek Mora, told
Reuters on Tuesday the central bank has done enough via rapid
rate cuts and now could keep policy on hold through the summer.
    The central bank has slashed its main rate by 200 basis
points in three moves since March.
    The Hungarian forint gained 0.56% and was trading
at 343.65 to the euro. 
    "The forint has been firming both versus the euro and the
dollar, but long-term bond yields have slowly climbed back since
the NBH stopped its QE," an FX trader in Budapest said.
    The central bank started its bond buying program in early
May with the aim of bringing long-term yields down. 
    On Tuesday, for the third time in a row, the bank said that
this week it would not buy any bonds at an auction..
    "There is no drama, we are still not back at the levels
where we were before the QE was announced, and yields are not
jumping ten to thirty basis points a day like they did in
March," an FI trader said in Budapest.
    According to the Eikon page of the Hungarian Debt Management
Agency, yields on the 10-year bond was 2.25% and it
was 2.75% on the 15-year bond.
           CEE MARKETS  SNAPSHOT    AT  1007                    
                        Latest     Previous   Daily    Change
                        bid        close      change   in 2020
 Czech                    26.5600    26.6210   +0.23%     -4.25%
 Hungary                 343.6500   345.5900   +0.56%     -3.64%
 Polish                    4.4444     4.4455   +0.02%     -4.23%
 Romanian                  4.8325     4.8380   +0.11%     -0.91%
 Croatian                  7.5430     7.5473   +0.06%     -1.29%
 Serbian                 117.5200   117.5500   +0.03%     +0.04%
 Note:     calculated from                    1800              
 daily                                        CET      
                        Latest     Previous   Daily    Change
                                   close      change   in 2020
 Prague                    942.50   946.3500   -0.41%    -15.52%
 Budapest                38080.86   38060.73   +0.05%    -17.36%
 Warsaw                   1799.37    1798.00   +0.08%    -16.31%
 Buchares                 8705.55    8719.25   -0.16%    -12.75%
 Ljubljan                  862.09     862.10   -0.00%     -6.89%
 Zagreb                   1655.93    1653.04   +0.17%    -17.92%
 Belgrade                  676.03     676.26   -0.03%    -15.67%
 Sofia                     457.61     457.53   +0.02%    -19.45%
                        Yield      Yield      Spread   Daily
                        (bid)      change     vs Bund  change in
 Czech                                                 spread
   2-year                  0.1190    -0.0300   +077bp      -4bps
   5-year                  0.4870     0.0670   +111bp      +5bps
                           0.9720     0.0850   +138bp      +7bps
 10-year                                            s  
   2-year                  0.2710     0.0010   +092bp      +0bps
   5-year                  0.8850     0.0060   +151bp      -1bps
                           1.4260     0.0360   +183bp      +2bps
 10-year                                            s  
           FORWARD      RATE       AGREEMENT                    
                        3x6        6x9        9x12     3M
 Czech             <PR       0.31       0.35     0.40       0.34
 Rep       IBOR=>                                      
 Hungary           <BU       0.78       0.70     0.66       0.90
 Poland            <WI       0.25       0.27     0.29       0.27
 Note:     are for ask prices                                   

 (Additional reporting by Alan Charlish in Warsaw; Editing by
Krishna Chandra Eluri)
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